The S&P 500 rallied to a record high the day after the presidential vote as uncertainty about the outcome faded.
“I don’t think many people had it in their playbook that we would know the next president by 11 am on Wednesday,” says Brian Garrett, head of Equity Execution on the Cross Asset Sales desk in Global Banking & Markets at Goldman Sachs. Previous US elections have taken days or longer to play out, and Garrett highlights that the two-day normalized decline in the VIX (the CBOE Volatility Index) was one of its largest in the past decade.
US stocks surged in part because many clients had reduced the amount of risk in their portfolio amid uncertainty about the results of the election, Garrett says on an episode of Goldman Sachs Exchanges. Investors have since re-engaged some of the trades that were successful after the 2016 presidential race, such as buying financials, small caps, technology, and energy stocks, he says.
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